Pensioners 50% better off than in 1994 - but food and energy prices rises hitting them harder

Hard times?: Pensioners have there seen their income rise in the past 17 years - but their spending power in on the way down.

Pensioners are 50 per cent better off now than 16 years ago but rises in food and energy prices have hit them harder than younger households, official figures have confirmed.

Average incomes across pensioner households climbed from an equivalent £297 a week in 1994-95 to £446 in 2010-11, the latest period for which data is available, according to the Office for National Statistics. The rise, which takes account of inflation, is just over 50 per cent.

The figures showed that single women in retirement survive on the lowest average incomes - £279 a week in 2010-11 compared to £310 for single men. Pensioner couples received an average £610 a week.

That leaves the average pensioner couple an annual income of £31,720. However, there are huge variances in incomes with the top 20 per cent enjoying an income four times higher than the lowest 20 per cent.

The ONS analysis focused on households in which the income of retired household members accounted for the majority of all income.

The averages are pushed higher because the figures include many people above the retirement age who continue to work, and therefore enjoy an income far above those living only on pension payments. Households where one person is above the retirement age, but their spouse or partner is not, are also included in the figures. This also has the effect of pushing the average higher.

Nonetheless, the overall rise in incomes may surprise retirees who have seen the basic state pension rise more slowly than earnings over the years. The explanation is that is that occupational pensions have become more prevalent and that these now account for a greater share of pensioner income.

Mean gross income of pensioners, 1994/95 to 2010/11, £ per week at 2010/11 prices.

There was a divide between younger and older pensioners. The under-75's received 32 per cent more than those above 75 in 2010-11, primarily because younger pensioners were more likely to earning more through some form of employment.

The figures take account of income from work, occupational and private pensions, benefits and investments. According to the data, the typical pensioner couple received the bulk of their income from the state pension and welfare payments such as housing and disability benefits.

The average income from occupational pensions – for those with them – was £172 per week for pensioner couples and £81 per week for single pensioners. Where pensioners had personal pensions, these paid £42 per week for couples and £33 per week for single pensioners.

Median net income for pensioner couples and single pensioners: by income quintile, 1998-01 and 2008-11, £ per week at 2010/11 prices.

Although the trend for pensioner incomes has been upwards, the ONS figures show a falling away recently. Having risen in almost every year since 1994, incomes showed a sharp decline between 2009-10 and 2010-11 as the recession hit.

And there is evidence that pensioners are seeing their spending power eroded faster than other age groups. The ONS analysis of spending showed pensioners used up a greater share of their income on items that have risen dramatically recently - such as food and energy bills - than other households.

Those aged between 65 and 74 spent 14 per cent of their income on food compared to the average 11 per cent for all households. The figure rose to 16 per cent for over-75s.

Mean gross weekly income of pensioner couples and single pensioners: by source of
income, 2010/11, percentages.

Pensioners groups also spent more than average on gas and electricity, but spent less than average on mortgage interest payments, which have become cheaper in the financial crisis because the Bank of England has kept interest rates lower to ease the burden on borrowers.

Martin Dodd, pensions expert at the Midlands Investment Agency, said: 'For pensioners, austerity isn't a fad. It's a way of life, imposed on them by plummeting annuity rates and puny interest rates.

'In 2010/11, more than a quarter of retired couples had to survive on an income of less than £15,000, and 45 per cent of single pensioners had to make do with less than £10,000.'